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Europe defends traditional claim to IMF's top job; Brazil disagrees

Thursday, May 19, 2011

BERLIN -- Europe is staking its claim to the top job at the IMF ahead of the expected departure of Dominique Strauss-Kahn, fending off any push from developing nations like China, Brazil and South Africa for an end to that traditional monopoly.

Strauss-Kahn's arrest on sex charges has put new focus on the informal arrangement under which a European heads the International Monetary Fund, an American leads the World Bank and another American holds the No. 2 spot at the IMF.

Europeans are citing the IMF's key role in fighting the eurozone's debt crisis as the main reason to keep the job on their continent. But developing nations -- many of whom are sitting on piles of cash while rich countries have loaded up on debt -- argue their increasing wealth and importance in the global economy means those old ways are outdated.

Brazilian Finance Minister Guido Mantega said it was time for "new criteria" to determine who gets chosen to lead the IMF.

"We must establish meritocracy, so that the person leading the IMF is selected for their merits and not for being European," said Mantega.

"You can have a competent European ... but you can have a representative from an emerging nation who is competent as well," he added.

China also said it was time to shake things up.

"The selection of the senior IMF leadership should be based on fairness, transparency and merit," Chinese Foreign Ministry spokeswoman Jiang Yu told reporters in Beijing.

Strauss-Kahn remains jailed in New York after his arrest for allegedly sexually assaulting a hotel maid but his departure from the helm of the IMF is expected to be only a matter of time. U.S. Treasury Secretary Tim Geithner has said Strauss-Kahn is "obviously not in a position" to run the IMF and that the organization needs to find an interim managing director.

Europe has "an abundance of highly qualified candidates" to lead the IMF, German government spokesman Christoph Steegmans declared Wednesday, underlining Berlin's insistence that a European must lead the body that oversees the health of the global economy.

He said Strauss-Kahn was entitled to presumption of innocence but "if the top job at the IMF does have to be filled at some point, then the government argues that there should again be a European."

The world needs an IMF chief who is "very familiar" with "Europe's particularities, the currency questions and also the political circumstances here," he told reporters.

The IMF, which lends to countries that get into financial and currency crises, has contributed to multibillion dollar bailout loans for Greece, Ireland and Portugal and is playing an important part in monitoring those countries' compliance with loan conditions.

Steegmans didn't name any potential candidates or say whether Germany itself might propose one. But Chancellor Angela Merkel has made the same point, along with the finance ministers of Sweden and the Netherlands.

South Africa's finance minister said a new IMF chief should come from a developing nation and that would broaden the world body's outlook.

"Such a candidate will bring a new perspective that will ensure that the interests of all countries, both developed and developing, are fully reflected in the operations and policies of the IMF," Pravin Gordhan said in a statement.

The United States has a major say in determining who will head the IMF, in part because it holds the largest number of votes at the 187-nation international lending agency.

Neil Mellor, an analyst at Bank of New York Mellon, raised the possibility that an IMF chief from Asia might have a significantly different outlook, which could affect the United States or European nations. Such a chief might be less inclined to criticize imbalances such as China's large trade surplus with the United States or China's practice of keeping its currency artificially low.

"Although clearly unabashed speculation, we wonder whether China would see an Asian head of the IMF as more amenable to its views?" Mellor said in a research note.

Possible European candidates mentioned in the media include French Finance Minister Christine Lagarde; the former head of the German central bank, Axel Weber; the head of Europe's bailout fund, Klaus Regling; and Peer Steinbrueck, a former German finance minister.

Candidates from elsewhere include Turkey's former finance minister, Kemal Dervis; Singapore's finance chief Tharman Shanmugaratnam; and Indian economist Montek Singh Ahluwalia.

Yet more possibilities include Trevor Manuel, South Africa's former finance minister; Mexico's central bank governor, Agustin Carstens; former Brazilian central bank president Arminio Fraga; and China's Min Zhu, who is already a special adviser to Strauss-Kahn.


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